The vagaries of progression betting and the defence of level stakes thinkingCLIMB 'THE PLATEAU'

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I think it's time to talk seriously about money management - in all its forms. It's a subject that holds wide differences of opinion; just ask your mate at the TAB, or even the different members of this magazine's staff! All have a view of one kind or another.

Do you always seem to have more cash on losing 6/4 chances than you do on those 10/1 winners? Does it seem impossible to get your capital up to a point where you can make good money? Do you periodically run out of betting capital?

I dare say you have answered YES to all three questions. But, don't let it get you down. You can break the vicious circle. What you do firstly is set in your mind the fact that the goal of proper money management is to make as much money as possible while avoiding the chance of losing it. Simple philosophy!

I have always believed that money management calls for a compromise between (a) considerations of safety and (b) desire for profit. In other words, the money we bet has to be invested as efficiently as possible.

Now I am going to talk about staking efficiently, but before I do so I want to highlight the fact that I am assuming the horses you intend backing are good selections - not wild 'maybe' chances you have plucked out of thin air!

Varying methods of staking are used by bettors all over the world. The progression methods have their supporters. They vary, naturally, but generally they employ the same effect. The punter increases wagers after a losing bet, or a series of losing bets.

Some methods call for an increase of 1 unit after each loser, others make larger leaps. The most sophisticated and alluring of these methods are the so-called 'due' methods. The bettor, in essence, decides the track owes him a living and he calculates that $50 a day will be nice.

Here's how it works: We assume Joe Punter averages three bets a day, five days a week, 45 weeks of the year. He'd like to make $20,000 a year. To do this, he'd have to win around $30 a bet, in round numbers. His first selection goes off at 6/1, so he divides 30 by 6 and bets $5. If the horse wins he makes his allocated profit for that bet. If it loses, he adds the $5 he lost to the $30 that was 'due' for the next bet.

That total is now $65.

The next horse goes off at 13/1 and $65 divided by 13 is $5, which becomes the bet. If he wins he has a profit of $60, which covers the amount he was trying to win. If it loses, the new 'due' total rises to $100 ($30 x 3 plus two losing wagers of $5 each).

On paper, then, we can say there is something comforting about such a method in that sooner or later the punter will have a winner and when he does he will have a profit of $30 for each and every bet he will have made. At the end of the year, $20,000 should be his.

The fact is, in my experience, the operation of such a method is not a comforting one at all. Losing streaks will give you the shivers. Even if you play short-priced favourites you expect long losing streaks. Can you keep your nerve in such instances?

If you play longshots, you might get a losing run of 50. It wouldn't be impossible. So, you may need huge capital reserves to overcome these losing runs, not only for the 'due' betting method but for any progression method (unless, of course, you build in some safety factor component which cuts out big bets).

Suppose you play only horses that are at 3/1 and seek to make $30 a play. Such horses win somewhat less often than favourites so you should not be surprised to lose as many as 25 races in a row at some time during the year.

If you have five straight losers, you will need a capital of $380 in order to make the next bet (which would be $140). For 10 straight losers you need $2420 in order to bet the required $688 on the next selection. And so it goes, frighteningly, on and on.

A 'due' bet method, then, as far as I am concerned, is ideal only if you have unlimited capital, no nerves at all and can bet large sums without affecting the odds (tough!).

At the opposite end of the scale from progression methods are the 1 percentage of capital' plans. If you have $100 and are betting a 10 per cent method you bet $10 (which is 10 per cent of $100). If you lose, your next bet would be $9, with the capital having dropped to $90. When you win a bet, your capital increases and so does the size of your bet.

Now, on the surface, all seems sweet. Fans of the idea say you bet less when you're losing and more when you're winning, so what could be better? In my view - and I know others disagree - the reasoning is fallacious.

Sooner or later a losing streak will end with a winner. Sooner or later a winning streak will end with a loser. The winner that ends a losing streak will have LESS money on it than the loser that preceded it. The loser that ends a winning streak will have MORE money on than the winner that preceded it.

In the long run, I contend, the average size of your losing bets will be greater than the average size of your winning bets. Such a practice cannot be sound.

Some examples will make this clear: Take a series of three bets with one winner at 3/1. On a level stakes basis your profit is $1 for every $3 you bet. It is equally likely that the winning bet will be either the first, second or third play of the series. With level stakes it does not matter which one it is but it DOES matter with the percentage of capital method.

Our starting bank is $100 and we are betting 10 per cent of it. The amount of money bet varies from series to series. The earlier a winner comes the greater will be the total amount bet. Thus, the percentage of profit for each dollar invested is different from one series to the next but in all three cases the percentage of profit per dollar invested is considerably smaller than it is for level stakes betting.

Overall, you get slightly more than $1 profit for each $6 invested as against $1 for every $3 invested at level stakes. As I have pointed out, the average size of a losing bet is greater than the average size of a winning bet.

Advocates of the percentage-of capital systems point out that they preserve capital during a losing streak. If your starting bank is $100 it will be dissipated after 10 straight losers using the level stakes approach. If you are betting 10 per cent of capital, however, it will last for 30 or more losers, depending on how you round off the fractions.

What these advocates don't tell you is what happens after the losing streak is over. Suppose you have a losing run of 10. You then cash a winner and proceed to cash every third bet after that. Each winner pays 3/1. How long will it take you to get back to where you started?

With flat bets you will be exactly even after 32 bets. Using a 10 per cent of capital method, after 58 bets you still won't be even' Not until the 59th bet will you get back to where you started (actually slightly ahead).

It can be argued of course, that a 10 per cent figure is too large, that 5 per cent is more reasonable, even 1, 2 or 2.5 per cent. But what happens with a reduced percentage? The variation between consecutive bets becomes smaller when the percentage is lower, so the difference between the size of the average winning bet and that of an average losing bet becomes less pronounced.

But if we really wish to reduce this difference, and we should, it makes sense to reduce it to the point where it doesn't exist at all - by making level stakes bets!

In short, in my view, the most rational method of betting is the oldest and the simplest. You bet the same amount on each horse.

Remember that progression betting attempts to put more money on winners than on losers - a fine goal but I believe attainable only by those punters who, perhaps through divine inspiration, know when a horse is going to win and when it is not.

The rest of us mere mortals will succeed only in placing our capital in a position where it will, inevitably, vanish. A percentage-of-capital approach, on the other hand, does a good job of preserving capital but at the expense of profit. Your money, basically, is being used inefficiently.

Despite all this, though, the level stakes bettor can learn much from a percentage method. He should realise it is vital to have enough of a bank to withstand long losing runs. The percentage method forces you to do this almost through subterfuge. You bet less and less on each subsequent loser so your capital lasts longer.

How much capital do you require? It depends on the kind of horses you bet. If you play favourites, anticipate about 25 straight losers. If your strike rate is only around 10 per cent, look out for 100 losers! These stats are only a guide. Then you have to take into account your personal profile.

Can you handle such losing streaks? Suppose you start with enough capital for 25 straight losers, and suddenly you find you have struck 20 losers in a row? Can you make a bettor-pass decision with as much confidence as when you started out? If you cannot, then you should have allowed for a lot more successive losers.

My own thinking is that you allow yourself TWICE AS MUCH capital as you reasonably think you will need.

And now to my personal Plateau Method of staking. Suppose we have decided to allow for 50 straight losers with a $500 bank. We will make $10 bets. We bet $10 each selection, win or lose, until we reach the next plateau'.

What is a plateau? It is an amount of money which is 50 times that of the next higher bet you can make. In other words, if we start at $500 and make $10 bets the next 'plateau' would be $550, which is 50 times $11.

That $11 is the next highest bet we can make when we begin with $10 bets. If you find it inconvenient to make $11 bets then wait till you reach $600 (for $12 bets) or $750 (for $15 bets).

It will take you, on average, less time to go to each subsequent 'plateau' because you will be making larger and larger bets. Suppose you have one-third winners at 3/1. It will take an average of 15 bets to go from $500 to $550 but only 7.89 bets to go from $950 to $1,000.

You are, then, betting level stakes, but upping them once you reach the various plateaus. It's a neat idea. I like it. I use it - and I win.